The Economic Crisis & What It Means for IT Jyoti Lalchandani Vice President & Regional MD IDC Middle East, Turkey & Africa

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

IDC in the Middle East, Turkey & Africa IDC Turkey

Expertise & Coverage

Istanbul

IDC North Africa Casablanca, Morocco


Over 90 Analysts, Consultants IDC MEA HQ IDC Egypt

& Events Associates Across the Region

Dubai, UAE

Cairo

IDC Saudi Riyadh


ICT Market Coverage Across

25+ Countries
Advisory Services to the ICT

Community, Governments, and Telcos

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IDC East Africa Nairobi, Kenya


IDC Events Reach Out to

4,500+ CIO’s and IT Managers Across 12 Countries
Upcoming Offices in Cairo,

IDC South Africa Johannesburg

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Egypt (Regional Support Center) and Riyadh, Saudi Arabia

Research & Analysis Methodology Supply-Side

Demand-Side

Analyst Insight

Market Models

ICT Vendors End-User Channels

(Customer Behavior & Technology Adoption)

• Disty’s

Industry/Population Demographics

• Resellers/VAR’s • SI’s • IT Training Firms • IT Consulting Firms • Retailers

Standard Definitions & Methodologies (Research and Forecasts)

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Trade Associations and Other

Agenda The Economic Implosion

IT Budget Fallout

Memos from the CIO

Accelerated Transformations Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

An Economic Shock Worldwide GDP Forecast

5% 4% 3%

4.1%

3.8%

4.0%

3.8% 3.8%

2.5%

2%

2.0%

2.9%

3.8% 3.3% 2.9%

2.7% 1.8%

2.5%

1.7%

1%

1.0% 0.2%

0% -1%

3.8%

3.8% 3.1%

2.9% 2.4%

4.0%

2007

2008

2009

2010

2011

2012

-2% -2.6%

-3% June 08 Forecast

October 08 Forecast

December 08 Forecast

Source: EIU – April 2009 Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

April 09 Forecast

The Economic Unknown

$1-3 Trillion For Bank Bailouts Tax Cuts Infrastructure SMB Incentives Health Care Smart Grid Auto Manufacturers Green Building

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

IT Budget Fallout 8% 6%

7.1%

WW IT Spending 7.1%

7.1%

5.5% 5.2% 4.2%

4%

6.3%

5.9%

5.9%

4.5%

4.2%

4.4% 2.6%

2%

5.5% 5.4%

6.0% 6.2% 5.7% 5.6%

2.8%

0.5%

0% -2%

6.1%

2007

2008

2009

2010

2011

-4% -6% -8%

-8.2%

-10% Aug-08

Nov-08

Jan-09

Source: IDC IT spending estimates, April 2009 Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

May-09 (Prelim)

2012

Emerging Markets in Context 7%

$1,174 $1,127 6%

6.2%

1,200

$983

1,000 800

5% 4%

3.8%

$618

600

2.5% 400

1.9%

200

$225 $240

$509

2.5%

2.3%

1.4% 1.5%

$101

2.8%

2.1% 1.0%

$32 $30 $24

$6

0.8%

2% 1%

Source: GDP data: EIU (April 2009); IDC IT Spending Estimates (April 2009) Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Sp ai n Si ng ap or e C an ad a

Eg yp t Pa ki st an

U

Q Sa at ar ud iA So rab ia ut h Af ric a Tu rk N ey or th Af ric a Le va nt

0%

AE

0

3%

IT as Share of GDP

IT Spending Per Capita US$ '08

1,400

Impact in the GCC 35% 30% 25% 20% 15% 10% 5% 0% -5%

24.0% 20.4%

26.2%

28.1%

21.8% 17.3%

13.4%

12.2% 7.7%

7.4%

9.4% 3.2%

2006

23.8%

24.0%

3.4%

2007

4.2%

2008

-10%

8.3% 7.6% 4.3% 3.3%

9.6% -1.0% -1.6%

2009 F

-5.8%

2010 F

-11.6%

-15% GDP UAE

GDP Saudi Arabia

IT Spending GCC

IT Spending UAE

Source: GDP data: EIU and IMF (April 2009); IDC IT Spending Estimates (April 2009) Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

GDP Qatar

IT Budgets Distribution 70% 60% 50% 40% 30% 20% 10% 0% UAE IT Hardware

Saudi

Qatar

Packaged Software

Source: IDC IT Spending Estimates (April 2009) Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

GCC Average IT Services

The Next Stage of IT Adoption 35% 30% 25%

24%

28%

26% + Healthy Oil Prices + Infrastructure Enhancements + Public Sector Reform + Liberalization/Privatization + Consumer Sentiment + Emergence of New Sectors + SME Adoption Begins - Inflation - Skills Availability

20% 15% 10% 5%

+ IT Asset Utilization/ Rationalization + SaaS, Managed Services, Virtualization + ROI/TCO Play + Regulatory/Compliance + Alignment of IT to Business + SMB Adoption - Skills

8%

0% -5%

2006

2007

2008

-10%

2009

-12%

-15% IT Spending UAE Source: IDC IT spending estimates (April 2009 update) Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

2010

Memos from the CIO

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Memos from the CIO Pre-Crisis (1/3) Breakdown of ’08 IT Spend

Initiatives already underway 30%

New initiatives 38%

Routine Infra Upgrades 32%

Source: IDC’s Middle East CIO Summit 2008

N = 102

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Memos from the CIO Pre-Crisis (2/3) Environm e nt frie ndly s olutions Mark e ting pe rform ance s olutions /track ing Procure m ent/s ourcing Supply chain m anage m e nt Virtualization Branch Autom ation Production/Mfring Solns Sale s pe rform ance track ing Re gulatory com pliance Mobility/w irele ss solutions deploym e nt HRM Solns Pe rform ance track ing Product deve lopm e nt/innovation IT Se curity Cus tom e r se rvice/Care IT Infras tructure

0

0.5

1

1.5

2

2.5

3

3.5

Priority of IT Investments Source: IDC’s Middle East CIO Summit 2008

N = 102

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

4

Memos from the CIO Pre-Crisis (3/3) CIO Challenges Other Regulatory Compliance Maintaining a Secure Infrastructure Contributing to the Bottom Line Pace of Product Development Managing Outsourced IT Services Managing Internal Budgets Supporting Operations Maintaining System Performance Staffing issues

0

5

10

15

20

25

# of Responses Source: IDC’s Middle East CIO Summit 2008 Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

30

35

2009 Memo (Post-Crisis) Q: What are the most significant factors driving changes in IT expenditure (budget) allocations in 2009 post crisis? To improve the availability and/or performance of IT systems Improve applications set that better fit our business processes Security of information systems

Greater focus on regulatory compliance

Greater focus on ROI/TCO

0 Source: IDC’s MENA CIO Summit 2009

5

N = 114

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

10

15

20

25

Degree of Importance

30

35

Memos from the CIO Post-Crisis 1

3

Bus Continuity Priority Improve Utilization of Assets

2

Explore New Business/Delivery Models

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Remains

4

IT as Business Enabler (Alignment)

Accelerated Transformations

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

Mega Trend 1: The Network Center Will Consolidate Servers As Virtual Machine Hosts 18% 13%

Virtualization and data center consolidation will continue Network and availability investments will increase Management overhead will increase

2007

2009

8.8 million virtual servers vs. 9 million physical servers ship in 2009

IT skills and organization will need to evolve to support a service-oriented infrastructure

Source: IDC Q4 WW Server Tracker, 2008 Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

19

Mega Trend 2: The Network Edge Will Expand Millions of Communicating Devices WW* 18,000

16,000

Enterprise bandwidth demands will explode Device support and asset management demands will explode

14,000

12,000

10,000

8,000

6,000

Mobile Devices CE & Industrial

4,000

2,000

Computers & Communications Equipment

0

2008 2009 2010 2011 2012 2013 2014 2015

Data center architectures will have to change Operational systems will drive new service level requirements

* Excludes voice- and SMS-only phones Source: IDC Device Universe Model, Jan 2009 Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

20

Mega Trend 3: Enterprise Information Will Explode Enterprise-Liable Exabytes Produced a Year

User Content

Overlap ~1,000 EB

1,234 EB

New levels of security and privacy will be needed

Enterprise Liable Content 1,530 EB

New storage, information management, content management will be needed

1,530

342 2008 2011 Source: IDC Digital Universe Study, 2008

New tools for search and discovery, including video, voice will be needed New relationship with business units will be needed – on policy, classification, data ownership

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

21

Mega Trend 4: Web 2.0 Will Create Problems Percent Hyper Connected Both For Business and Personal Use

79%

64%

Laptop PC

PDA

Enterprise-to-customer contacts will grow by an order of magnitude Interactivity and mobility will blur work and personal boundaries New client access tools will fragment customer relationships

46% 67%

Text or Instant Messaging

Posting to Blogs, Wikis, Forums

Web 2.0 will drive new policy needs – with IT in the middle

Source: IDC Study on Hyperconnectivity, 2008 Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

22

Mega Trend 5: The IT Domain Will Grow If it runs on the IP network IT will end up managing it IT skill requirements will diversify – internal customers will multiply Real time applications will increase IT risk exposure Operational IT and general IT will become one and the same

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

23

Mega Trend 6: IT Will Have To Reorganize Client Contact

Mixed Outsourcing

UsageBased Charges

Business Process Responsibility Embedded IT IT Marketing

New Staff/ Org

Virtual Teams Business Objectives

Job Rotation Capital Spending Visibility

Six Sigma Process Management

New Reporting Structure

IT performance will be tied to business performance Infrastructure money will come from consolidation New project money will come from business payback IT and business department boundaries will become porous

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24

Impact on IT

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25

Contact

Jyoti Lalchandani +971 4 391 2741

[email protected]

Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.